Wage Stagnation: What Is The Answer?

Have you ever noticed that wages seem to have been the same for quite some time? It seems like wages stay around the same, but the cost of living increases year after year. It’s because wage stagnation is a major crisis hitting developed countries, including Canada.

The Organization for Economic Cooperation and Development (OECD) released a report that with unemployment rates at record lows in countries around the world, wage growth has become ‘missing in action.’ They have reported that developed countries are seeing unprecedented wage stagnation.

Higher profits do not equal higher wages. Those profits just put money into the pocket of the 1 per cent.

So we know there is stagnation, but what are the reasons for it?

New Company Structure
The OECD has pointed out that ‘superstar’ tech companies that have been popping up around the world are structured in a way that eliminates the need for lots of employees. Many huge tech companies have less than 100 employees. This trend reduces the amount of money that goes into wages and increases the amount going to the shareholders and owners.

Rise of Low Skilled Jobs
There has been a huge increase in the number of low-skilled jobs around the world due to the rise of technology and globalization. This has been creating a polarization of wages at the very top and bottom, eliminating the middle-class. While there are more jobs available, more and more of them are low-paying and low-skilled.

Lack of Unions
Unions change the balance of power in favour of employees when dealing with employers. Unions set the bar for wages for industries for decades, and as unions started to decline so did the increase in wages. Without a union standing up for employees in the workplace, employers have not felt the pressure to increase wages. Union members earn on average $5.28/hour more than non-union workers in Canada. That is an extra $43.2 billion into our economy.

Stagnant Despite Minimum Wage
In 2016, the Alberta Government unveiled a plan to raise the minimum wage in Alberta to $15/hour. It was raised $1.00 to $12.20 per hour on Oct. 1, 2016, to $13.60 on Oct. 1, 2017, and will be $15 by Oct. 1 of this year. Despite this, overall wages have not increased by much and any economic growth has almost exclusively benefited the top 1 per cent in the province.

The good news is that the popularity of unions is increasing, especially with millennials who view them favourably and much more favourably than corporations. With the addition to unions in the workplace, wages can raise for union members and non-union members alike.

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